Is equity market sentiment too bubbly?

<p>One of the most-underrated indicators in the world is the AAII Sentiment Survey, which has been running since 1987 and measures sentiment of American investors. It was a screaming contrarian buy<a href="https://www.forexlive.com/Orders/october-forex-seasonals-it-was-a-volatile-september-what-comes-next-20220930/" target="_blank" rel="follow"> in October 2022 </a>in what turned out to be a sensational rally for tech shares.</p><p>Now it's starting to look bubbly. </p><p>The level of pessimism at 19.3% is just below the late-November reading but it's at its lowest level in almost six years. Meanwhile, bullishness is at a five-month high. Note that five months ago, the S&amp;P 500 peaked in July before falling significantly into late October.</p><p>I wouldn't want to be outright bearish here on a contrarian trade but I think there is a great setup for rotation away from mega-cap tech and towards value and highly-indebted sectors. That trend should extend in early January as well, with many investors who are long mega-cap tech unwilling to sell now because they won't want to trigger a tax bill for this year.</p><p>That kind of thinking is unfolding in equities now with shares of the biggest tech names now dragging the Nasdaq Composite 0.4% lower led by NLFX down 2.3%, MSFT -2.5%, AMZN -1.7%, GOOG -1.7% and NVDA -0.9%.</p>

This article was written by Adam Button at www.forexlive.com.